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Betting big feels good. Everyone who has ever pushed their money all-in during poker or stacked up a huge number of chips on one number in roulette will tell you that even if they lost it all, the rush of seeing that flow of cash as it goes from safe to at risk of booming or busting is thrilling.
But as fun as it is, you do not make money off of betting big. You can, it’s possible, but you don’t make rules saying that you will. Making money off of uncertain things with too many variables to intellectually consider is a much more nuanced process than just pushing in piles of cash or stacking up chips.
If you are going to learn to trade stocks, then you should absolutely be practicing with a demo account first. But what is a demo account? How does it work, and how does it help you?
A stock trading demo account is an account on a stock trading platform that allows you to participate in the market using fake money. Thankfully, the market is too big for any one person to have a significant effect on it. Some ultra-wealthy people are exceptions to this rule, but even for them there are rules in place to make sure they don’t do anything like buy all a company’s stocks in secret.
Because the stock market is too big for you, as an individual, to have an effect, a stock price is likely to go up, down, or in circles whether you buy a ton of it or not. And because of that, you can use what is known as a “demo account” to practice trading without spending real money.
Since the market will work the same whether you are using real money or not, demo accounts let you safely evaluate the strength of your strategies and assumptions without risking your money.
Lots of people wonder how this could help them learn stock trading. The question most people come to first is, “How am I supposed to learn anything real without spending real money?”
The logic people are going by when they ask this question is that if they don’t get burned, they won’t know how to avoid danger. But let us offer a different way of looking at it: Ballerinas hold the bar. Gymnasts work with a harness tied to them on pads before they do their routines for real. And stock traders practice with fake money before they try using real money.
Imagine that you just put $100 into buying stocks. Suddenly, the stock drops in price. Your $100 investment is worth $90. The reality of the situation is that if a stock price drops, it is likely to continue dropping. If it rises, it is likely to continue rising. But people often don’t listen to logic.
They hold onto the hope that if they just hold on a little longer, they can ride the wave of the rebound—the moment the stock goes from falling to rising as sharply as it fell. The logic of “Falling means it will keep falling,” oftentimes loses out against this hope that the price will magically invert.
Why does this matter? Because in the month or so it takes for your $100 investment to go from $90 to $110, you could be turning that $90 into $110 elsewhere. You need to practice withdrawing your money when an investment is bad. You can make two good investments in the time it takes for a bad investment to turn good. And it is easier to do this if you get used to it with fake money.
There are more factors than you might expect to find a good stock trading demo account, but the qualities they can have boil down to essentially a few things: The analysis tools provided by the account, the research tools, the markets it has access to, and the lessons it can teach you.
Based on those qualities, we have determined the top 5 best stock trading demo accounts.
While it is far from the best stock trading platform in general, Capital.com is one of the best stock trading demo account platforms out there due to its low cost and high customizability.
There is a lot of room for customizability in a person’s stock trading interface. You can have your watch lists, your industry tickers, your news stories, and shortcuts to buying and selling things. That is not even including any alerts you might have set up for the price changes of specific stocks.
Capital.com provides you with all of that. You also get to choose how much fake money you start with and can always add more back if you want. That might not seem like an amazing feature, but there are some demo trading account platforms that are trying too hard to get you to use them to trade.
Because of this desire to see you using them for real, those demo account sites will give you a time limit or a trading limit—if you run out of time or lose all your money, then you are done.
Capital.com does not do that. You can give yourself millions of dollars to spend just for the fun of it, lose it all, and then go back with billions. This won’t help you learn most market tricks and strategies, but it actually gives you the upside of seeing everything play out with larger numbers.
There are two main problems with Capital.com. The first is the fact that its customizability is great, but it means that there will be an initial adjustment period where it all feels clunky and half-formed.
Newer traders without a lot of patience will be turned off by that. It also does not tell you what every single tool it gives you does exactly, so you better either know what those tools are beforehand or know where to look them up.
The second problem is that it is not a great place to trade. Its market is more limited than its demo market, it has commission fees, and its interface is even slower for real trades. A lot of these problems are gone with their demo version but find another platform to trade on.
The two main methods of analyzing trades are known as “fundamental analysis” and “technical analysis”. Specialists in both fields think specialists in the other field are dirty liars.
Fundamental analysis is using the events of the world to try and figure out a company’s approximate value relative to its share price. If there is a lithium shortage, for instance, this might make Tesla more or less expensive. If people decide they don’t want iPhones, this might do the same for Apple.
Technical analysis is the practice of using the stock price itself to determine what its value should be. A ton of mathematics goes into trying to predict what is physically possible for the number itself. After all, unless something truly outrageous happens, the number can only go so far up or so far down.
TD Ameritrade is special because of how accessible it makes both of these, especially the notoriously impenetrable Technical Analysis. It does this with what is known as “thinkorswim” (all lowercase). This is a technical analysis tool that makes the price charting and prediction equations easy to access.
But that would mean nothing if you didn’t at least somewhat understand them. It is worth noting that part of the reason TD Ameritrade’s demo account is so good is because you do not have to know the math behind its analysis tools all that well to understand them. And even if you make a mistake while using them, it’s not real money, so you can make a big mistake and still learn something.
Aside from that, TD Ameritrade is also good for a variety of different traders. It is especially good for people who are looking to set up retirement accounts, however, as they have support systems for that.
The interface and tools of thinkorswim can only be so good before it runs into the fact that it is trying to communicate some of the most advanced and unintuitive elements of trading that exist. Part of the reason why most people prefer fundamental analysis is that it at least makes sense on instinct.
The news effects the world, and most companies exist in the world, meaning that if something terrible happens on the news you can expect it to affect some company in some way.
Technical analysis is nowhere near that simple, and TD Ameritrade’s interface is totally focused on it.
Some things require more care to trade than others. Besides stocks, there are tons of other “securities” (IE tradable assets) that you can trade in a similar manner.
Some of the most common are stock options and CFDs, also known as contracts for differences. However, these securities are very risky.
When you trade stock options you are actually trading the ability to trade the stock. It’s kind of like if you owned the reservation to a table at a restaurant while the table itself still belongs to the restaurant. The thing about stock options is that they can cost you money to hold if you hold them too long.
CFDs have a similar issue. Basically, a buyer says they will inherit the price change of a certain stock. This will mean they either get revenue from the price going up or pay money for the price going down. You might notice that the buyer never actually owns the stock. If that makes it sound like gambling to you, then you are not the only one that thinks that. You can also end up paying a lot for these.
AvaTrade is a great place to demo trade because it allows you to get a stock trading demo account that can trade in demo options and demo CFDs. These carry all the same kinds of risks but allow you to learn about how they work and how to make money off of them without risking big losses.
That is particularly important when the securities in question have potentially infinite loss potential.
On top of that, AvaTrade has a surprisingly good interface and a deep well of resources you can use to learn about the complex securities it offers to you.
Easily the biggest issue AvaTrade has is the fact that its demo account is time limited. You can only make use of it for a month, and then you have to either open a new account or go to real trading.
You have to do the same thing if your demo account loses all of its fake money. If you make a bad bet that results in you zeroing out, there is no easy way to get that money back. Considering how risky most people act when trading options (infinite loss potential is often viewed as the flip side of the “infinite gain potential” coin), losing all your money in this way is actually pretty likely.
And of course, we would be remiss to not mention the fact that the main thing you are learning when you use AvaTrade is how to take part in one of the most inconsistent parts of the market. Seriously, more than 70% of people who trade options and CFDs lose money and never gain it back.
Calling it “big number trading” does it a bit of a disservice, even if it is technically accurate.
The correct name for making trades that involve large amounts of money is “high yield investment”. And sadly, since the people who make these sorts of investments run the world, we shouldn’t make them feel silly.
But what makes big number investment different from normal-sized investments though? The answer to that is not as simple as you think. Fidelity specializes in big number investments in general, meaning they give you tons of tools and advice on how to make use of it even when you’re demo trading.
Naturally, you can expect that their demo account will give you whatever amount of money you need to simulate a trade. Interestingly, they even let you run simulations of how the market will act further in the future. Lots of demo trading platforms can do this, but they rarely do, as they always have to emphasize that their simulation should never be taken as fact. It is just a mathematical projection.
Still, that projection is not at all central to what Fidelity offers for big number demo trading. Both for people who are doing real investments and people who are learning demo investments, Fidelity offers a ton of advice through a live support team to help you make the most out of your money.
That includes a wide variety of different trading strategies they can advise you on, whether that means day trading what you have or investing it for the long term to collect dividends.
As fun as it is to give yourself ten million dollars to invest, Fidelity’s tools are so focused on high yield investment accounts that you might actually develop bad habits if you don’t have the money to back up the lessons you learn from it.
As you might have guessed already, Fidelity’s focus on accounts in excess of around $10,000 makes them hard to recommend to anyone who has less than that. Earlier one, we mentioned how only certain people have to worry about their money actually affecting the market. If we are being honest, the bar for that is lower than we made it seem, at least when it comes to specific companies.
There are maneuvers you can do (of dubious legality) which Fidelity will teach you to do in order to grow your money. But those maneuvers are simply not available to people with less money. Some of the most profitable stocks are not available for the same reasons, and the cheaper stocks don’t act like them.
So far, we have talked mostly about stocks, with a brief aside about options and CFDs. But as anyone that is involved in the market will tell you, those are far from the only securities that you have available to you. Some aren’t even nearly as risky as options and CFDs too, meaning you can get into them freely.
IG is easily the best platform for accessing a more diverse pool of assets to demo trade. This is curious, as plenty of other trading platforms will have these assets, but not allow them to be traded through their demo accounts. But why is that? And why does IG allow you to trade them?
The main reason is that those other platforms are concerned that someone will see how erratic these other markets are and choose not to invest in them. But the great advantage of these other markets is that, as erratic as they are, they do not have the “infinite loss” potential of options and CFDs.
The “other markets” we are talking about are the commodities, foreign currency, and bonds markets. IG not only gives you access to these markets but also provides a ton of information on how they work and what they do. Which is good, because they tend to work massively differently.
For instance, foreign currency is always bought and traded in pairs of currencies (usually itemized as “pips”, which are percentage points of whole tender). Bonds can be issued by governments, and while you can sell them after you get them from their source, doing so will call the value of the bond into question, since they are usually bought as a passive income method.
In short, there are a lot of different directions you can go with IG’s demo trading accounts that other trading platforms do not let you go.
If you got all excited reading about the different things you can trade using IG, then you probably went to IG’s websites and felt the wind leave your sails rather quickly. IG’s website is not good.
In fact, it looks and operates like something out of the 90s. And that’s because it is—IG has been around for a while, since long before its name got appropriated as the initials of “Instagram”, and as such has an interface that suffers from everyone one of those assets getting added over years and years.
Interestingly, some people do prefer IG’s dry approach to its interface. It’s not as if it hides anything under layers of menus and drop-downs like some modern designs. The issue is more than things get buried. You have to scroll and scroll to find what you are looking for, or open multiple windows and go through several button presses in order to execute an order that would take one window elsewhere.
The end result is an interface that is unintuitive. And being unintuitive can be worse than being bad, as it means that things work, they just work in a different way than you might expect. Human nature is a powerful thing, and you would be surprised at how hard it is to change your mindset to match IG’s.
Now that you know where to demo trade, you are going to want to know how to demo trade. If you think back to our description of TD Ameritrade’s thinkorswim program, you might remember that we mentioned “fundamental analysis” and “technical analysis”. Let’s go over how to apply those.
The biggest issue you are going to face with fundamental analysis is that it is hard to tell when something is going to have a direct effect on an industry or an indirect effect on an industry.
For instance, think about that lithium shortage we mentioned. Will that have a direct effect on electric cars, or an indirect effect? Well, electric cars currently cannot exist without lithium. There is no replacement if there is suddenly supply issues with lithium, so that’s a direct effect.
The rule of thumb with fundamental analysis is not to get too gung-ho. The harder a connection is to see, the smaller than connection is. The problem is that it takes more work to see harder connections, so many traders will end up overvaluing them and end up imagining them to be secret knowledge.
Only actually act on direct effects.
As mentioned before, technical analysis is based on the movements of the price of a stock. So, how do you use math to determine where that price will go? Well, answering that question is complicated. Too complicated to do in a single article. What we will do is simplify it with vocabulary.
When you look at a stock price over time, you will usually notice that it slowly rises (hopefully) while bouncing up and down. These little bounces will often appear to bounce off an invisible floor and an invisible ceiling. If you draw a line that connects as many peaks as possible, you will have the ceiling. And if you do the same with a line that connects the pits of the valleys, you have the floor.
That bottom line is the “demand line”. That line is unlikely to move, as it is determined by how much outside demand is on the company’s services. The top line is the “supply line”, and it is determined by how much internal capacity there is for the company to capitalize on that demand.
You can generally expect that a company’s stock price will bounce back after it drops down to the demand line and fall after it reaches around the supply line.
Obviously, each of these forms of analysis can help you out in understanding the other. For instance, there might be a trend in the market that indicates that demand for a company’s services is about to fall massively. You can use that to anticipate that the company’s stock price will actually fall below the demand line. While other people are “buying the dip”, you are predicting the dip more accurately.
One of the best things to practice while demo trading is making realistic goals. That means knowing how much money you, personally, can make off of the investment you put into the market.
This is a particularly good thing to do while you are demo trading, as anyone just starting out with trading has no idea what a “realistic goal” is. Should you be trying to make $2 a day? $2 a week? If you buy a stock and it drops in price, should you sell it and move on, or hold on for dear life?
There are two ways we can advise to strategize to make realistic goals.
Start by trying to make one dollar in five minutes. The best way to do this is finding a stock that is increasing in price at the moment you are looking at it. See how much it increased in the last five minutes, and then use your demo account’s fake money to buy enough of that stock so that if it increases by the same amount in the next five minutes, you make one dollar.
Sell that stock the moment you have that dollar. Sometimes this will mean spending $100, sometimes it will mean spending $20. Sometimes the stock will increase in value even more, sometimes it will drop through the floor. Either way, sell it after five minutes.
Remember, you’re not trying to make $1. You’re trying to make $1 in five minutes. If the clock runs out, cash out, whether you have the money or not. A few different skills will be trained here: First, you will get a feeling for how certain companies increase and decrease their prices.
Second, you will get an idea of how much money the companies you are interested in cost.
And last, you will get used to selling even when you don’t want to—because the biggest weakness a trader can develop is holding onto something they don’t want to sell.
Demo trading has a lot of layers to it. There are different securities available, different forms of analysis, and different ways to learn how to trade. But they all boil down to the same objective: Making money.
These five platforms are great for teaching you how to make money, so long as you have the patience.
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